Key Economic Reports
Experienced traders often recommend not trading off reports due to increased market volatility and the potential for whipsaw action to occur. However, it is important to follow many economic reports to determine the trend of growth and inflation present in the economy—which in turn drives the longer-term market direction. As such, economic indicators can give traders vital information for making short-term trading decisions, as well as timing their long-term investments. In this guide are just a few important indicator reports that measure growth or inflation and are marked as such. There are many economic indicator reports used to analyze the markets. Always be sure to do your research before investing or trading.
Existing Home Sales
Measures Growth
This report from the National Association of Realtors (http://www.realtor.org/topics/existing-home-sales) is released near the end of each month (usually between the 23rd and the 29th). It gives a measure of the selling rate of existing homes at the national level and in four regions. It includes a geographical breakdown, a measure of prices, and house inventory (the number of months it would take to deplete the existing supply of pre-owned houses at the current sale price). According to TheStreet.com, it is considered a good gauge of near-term spending for housing-related items and of consumer spending in general. Sales of existing (or pre-owned) houses account for roughly 84% of all houses sold.
New Residential Sales
Measures Growth
New houses account for the other 16% of all houses sold. This monthly report from the US Census Bureau (http://www.census.gov/construction/nrs/) collects new home sales, based upon the following definition: “A sale of the new house occurs with the signing of a sales contract or the acceptance of a deposit.” According to the bureau, the house can be in any stage of construction: not yet started, under construction, or already completed. It covers sales on the national level, as well as the four regional levels of Northeast, Midwest, East and West. The report, usually released between the 23rd and 29th of each month, also contains price and inventory figures. It is also a consumer spending gauge.
Durable Good Order
Meausres Growth
This monthly report also comes from the Census Bureau (http://www.census.gov/manufacturing/m3/). It is a measure of the value of orders received by manufacturers for durable goods—products such as appliances and motor vehicles, which are designed to last three or more years. This report is considered a key factory-sector indicator, and is monitored by the Federal Reserve in setting monetary policy. It is usually released between the 23rd and 29th of each month.
Federal Open Market Committee (FOMC) Meeting Minutes
The FOMC (http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm) meets eight times a year to set the fed funds rate. Also discussed is the near-term direction of monetary policy, which is released immediately after the meeting. According to FXstreet.com, “Market participants speculate about the possibility of an interest rate change at these meetings, and if the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.” A press release is issued immediately after each meeting, and the meeting minutes are available within three weeks.
Consumer Price Indexes (CPI) and Producer Price Indexes (PPI)
Measures Inflation
CPI indexes include monthly data on changes in the prices paid by urban consumers for a representative “basket” of goods and services. According to the bureau, it is the most widely-used measure of inflation and is an indicator of the effectiveness of government policy. It is also used as a means for adjusting income payments.
PPI measures the average change over time in the selling prices received by domestic producers for their output. A higher-than-expected PPI is considered inflationary. These are considered backward-looking indicators. For a given month, the PPI is released near the middle of the following month, and the CPI follows a few days later. Both of these reports come from the US Department of Labor, Bureau of Labor Statistics (http://www.bls.gov/cpi/).
Weekly Jobless Claims
Measures Growth
This report, officially called the “Unemployment Insurance Weekly Claims Report,” is usually released every Thursday by the US Department of Labor (https://www.bls.gov/opub/update.htm). It includes initial jobless claims, four-week moving average of initial claims, insured unemployment (continuing claims), and insured unemployment rate (jobless rate). Because it is weekly, it is often used to gauge the direction and strength of employment and the economy. However, its results and effectiveness are considered volatile, because they can be substantially affected by extreme weather, temporary shut downs, and other unforeseen events.
Institute for Supply Management (ISM) and Non-Manufacturing Reports
Measures Growth
The ISM, reportedly the largest supply management organization in the world, releases both of these Reports on Business at https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/ . The “Manufacturing ISM Report on Business” covers employment, inventories, new orders, production, supplier deliveries, and other indicators—as well as the Purchasing Managers’ Index. The information is based on a survey of purchasing and supply executives in about 400 industrial companies (covering 20 industries). It is considered a forward-looking barometer of manufacturing activity (representing about 12% of the economy). The report is released on the first business day of each month.
The “Non-Manufacturing Report on Business” covers 10 non-manufacturing indicators, including business activity, employment, inventories, new orders, prices, and supplier deliveries. It is based on a survey of about 370 purchasing and supply executives in more than 62 different industries, and is considered a forward-looking measure of non- manufacturing activity (accounting for 76% of the economy). It is released on the third business day of the month.
Wholesale Trade
Measures Growth
The Census Bureau compiles national estimates of monthly sales, end-of-month inventories, and inventory-to-sales ratios (by type of business) for US wholesale firms. The estimates are used to research economic trends, assess near-term economic activity, and forecast future demand. The report is released early to mid-month at http://www. census.gov/wholesale/.
Construction Spending
Measures Growth
The construction spending report comes from the Census Bureau and measures the amount of spending toward new construction. It is broken down between residential, non- residential, and public expenditures on new construction. Because the monthly changes are both volatile and subject to huge revisions, only trends extending three months or more can be viewed as significant. It is used, however, to help predict upcoming GDP numbers. It is released on the first business day of each month at https://www.census.gov/topics/business-economy/library/flyers/construction-spending.html
Business Inventories
Measures Growth
This report includes sales and inventory statistics from all three stages of the manufacturing process (manufacturing, wholesale, and retail). Although two of its components are already released by the time this comes out, retail inventories sometimes swing enough to change the aggregate inventory profile—which might affect the gross domestic product outlook. In this instance, the report can elicit a small market reaction.
The report is released by the Census Bureau around the 15th of each month at https://www.census.gov/mtis/current/index.html .
Industrial Production and Capacity Utilization
Measures Growth
This report consists of industrial production and related capacity utilization rates covering manufacturing, mining, as well as electric and gas utilities. Movements in this report can help explain gross domestic product changes as the economy shifts. It indicates to what extent various industries are participating as economic growth changes. The report is released by the Federal Reserve usually between the 14th and 17th of each month at http://www.federalreserve.gov/releases/g17/current/.
American Petroleum Institute (API) Energy Reports
Measures Inflation
The statistical information from API includes the average price of gasoline at the pump, the countries from which the US imports oil and product, and state motor fuel tax rates. The report is released every Tuesday afternoon. The release time may differ during holiday weeks at https://www.api.org/products-and-services/statistics/api-monthly-statistical-report .
Energy Information Administration (EIA) Gas Reports
Measures Inflation
The EIA (https://www.eia.gov/) compiles a wide range of energy sources within the US, including oil, natural gas, coal, electric, power, and renewable energy. The report is distributed every Thursday at 10:30 EST at http://ir.eia.gov/ngs/ngs.html. The release time may differ during holiday weeks.
Housing Starts and Building Permits
Measures Growth
According to the US Census Bureau housing starts measure when excavation begins for the footings or foundation, while building permits are a total of the number of housing units authorized to be built. The forward-looking report measures housing, this has a major im- pact on consumer spending. The report is usually released between the 14th and the 17th of each month at http://www.census.gov/construction/bps/.
Retail Sales
Measures Growth
This report from the Census Bureau estimates consumer purchases at retail and food service firms. It can be a good indicator of consumer spending, which accounts for almost two-thirds of all economic activity. It can also provide clues about the pace of quarterly GDP. It is released approximately nine working days after the end of the reference month at http://www.census.gov/retail/.
Gross Domestic Product (GDP)
Measures Growth
This report from the Bureau of Economic Analysis looks at the total market value of all domestically produced goods and services. It is used by economists and market analysts to help gauge overall corporate profits, and is considered a comprehensive account of output, demand, and inflation. It is usually released at the end of the month, three times per quarter (advance, preliminary, and final reports) at https://www.bea.gov/news/current-releases .
Theoretical Reactions to Reports
The tables on the following pages are meant to give you a review on how the market should theoretically react to economic reports if the report comes out higher than expect- ed or lower than expected. Please keep in mind this is simply a theoretical prediction. The market may not act in this manner upon the release of these reports. Your risk of trading during reports could increase due to increased market volatility.
Higher than Expected
| Report Name | Stock | Interest Rate Price | Dollar | Metals | Energies |
|---|---|---|---|---|---|
| Existing Home Sales | Higher | Lower | Higher | Lower | N/A |
| New Home Sales | Higher | Lower | Higher | Lower | N/A |
| Construction Spending | Higher | Lower | Higher | Lower | N/A |
| Housing Starts | Higher | Lower | Higher | Lower | N/A |
| Durable Goods Orders | Higher | Lower | Higher | Lower | N/A |
| CPI | Lower | Lower | Higher | Lower | Lower |
| PPI | Lower | Lower | Higher | Lower | Lower |
| Non-Farm Payrolls | Higher | Lower | Higher | Lower | N/A |
| Retail Sales | Higher | Lower | Higher | Lower | N/A |
| Business Inventories | Lower | Higher | Lower | Higher | N/A |
| GDP | Higher | Lower | Higher | Lower | N/A |
| Personal Income | Higher | Lower | Higher | Lower | N/A |
| FOMC (rate increase) | Lower | Lower | Higher | Lower | Lower |
Lower than Expected
| Report Name | Stock | Interest Rate Price | Dollar | Metals | Energies |
|---|---|---|---|---|---|
| Existing Home Sales | Lower | Higher | Lower | Higher | N/A |
| New Home Sales | Lower | Higher | Lower | Higher | N/A |
| Construction Spending | Lower | Higher | Lower | Higher | N/A |
| Housing Starts | Lower | Higher | Lower | Higher | N/A |
| Durable Goods Orders | Lower | Higher | Lower | Higher | N/A |
| CPI | Higher | Higher | Lower | Higher | Higher |
| PPI | Higher | Higher | Lower | Higher | Higher |
| Non-Farm Payrolls | Lower | Higher | Lower | Higher | N/A |
| Retail Sales | Lower | Higher | Lower | Higher | N/A |
| Business Inventories | Higher | Lower | Higher | Lower | N/A |
| GDP | Lower | Higher | Lower | Higher | N/A |
| Personal Income | Lower | Higher | Lower | Higher | N/A |
| FOMC (rate increase) | Higher | Higher | Lower | Higher | Higher |